Business

BA owner IAG's profits dented by weak pound

BA planes Image copyright PA

Airline group IAG, the owner of British Airways and Iberia, says the weak pound cost it €162m (£145m) in the third quarter of the year.

Operating profits in the July to September quarter fell 4% to €1.2bn.

The airline said it expects operating profits for the full year to be up by about 7%, a lower rate than the one it forecast in July.

There was a raft of cost increases, including employee costs up by 1.6%, and handling and catering up 7.5%.

The company said the increase reflected additional compensation fees and baggage claims related to operational disruptions, including air traffic control strikes in France.

'Weak trading'

Its lower profits guidance follows similar moves form rivals Easyjet and Ryanair.

Despite that, Willie Walsh, IAG's chief executive, said the quarterly performance had been a "strong" one.

However, he added that the results had been affected by the "tough operating environment", including the impact of the weak pound and disruption from strikes.

Mr Walsh said: "At current fuel prices and exchange rates, IAG expects its operating profit for 2016 to be around €2.5bn, and has seen no significant change in its short-term trading conditions."

The group said it had seen "weak trading conditions" in June - both before and after the Brexit vote - with the majority of the weakening demand affecting its premium cabins.

The results follow a new pension arrangement, announced on Wednesday, which caps any extra contributions British Airways could be forced to make to the fund. That is expected to give BA more room to pay dividends to parent IAG.

IAG shares closed 4.8% higher at 433.5p, but have fallen 28% since the start of the year.

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